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Jamster can't shed "scam" rep soon enough, settles with FTC for $1.2M

Jesta Digital is in hot water for tricking users into believing their devices were virus infected.

Mobile marketing and advertising company Jesta Digital has settled with the Federal Trade Commission (FTC) over a complaint that it duped Angry Bird players into paying for fake anti-virus software, the consumer protection agency announced on Wednesday.

Los Angeles-based Jesta Digital, which does business as well-known ringtone and mobile content brand Jamster, agreed to pay $1.2 million to the FTC and an unspecified amount to mobile users who were charged for installing the bogus Android anti-virus (AV) app between August 2011 and Tuesday.

According to the FTC, consumers were tricked into accepting charges for a supposed AV program known as "Android AV" – which they didn't need and usually didn't receive – while they played the popular Angry Birds game. Pop-ups pushing the app claimed users' mobile phones were infected by viruses, a common ploy known as scareware.

Instead actually acquiring any security software, consumers who clicked the ads – or clicked anywhere on their screens, for that matter– received a $9.99 per month charge for ringtones and other content on their cell phone bills, the FTC alleged in a complaint (PDF) filed this month in a U.S. District Court in Washington, D.C.

The FTC claims that Jamster was able to automatically charge consumers by using a wireless access protocol (WAP) billing technology, which captures phone numbers from SIM cards and then bills consumers without them providing the information themselves to companies.

“Using WAP billing, [Jamster] arranges for its charges to be included on consumers' mobile device bills or deducted from consumers' prepaid mobile device accounts,” the complaint alleged. “In many instances, [Jamster] charged consumers for ringtones or other goods or services without their authorization or agreement. Among other things, [Jamster] charged consumers who did not click on the 'subscribe' button and charged consumers for products they did not order."

The warning messages (left) users saw while playing Angry Birds was a banner ad containing a robot logo which looked suspiciously similar to Android's own logo. According to the complaint, on the page where users clicked to download the software, there was fine print notifying them that they could get 20 ringtone and mobile content downloads for $9.99 per month.

In the compliant, the FTC included evidence that Jamster's executives were aware that the ads were scamming consumers.

In an internal Jamster email that the FTC obtained, it found that only 372 people among the 100,000 consumers who downloaded the rogue app received a link that led them to the marketed software.

In addition, a January 20, 2012 email from Jamster's VP of global marketing operations to the director of global marketing made mention of the shady marketing ploys.

“We are anticipating if more customers are able to get the content that they signed up for, that this will lower refunds and churn, and increase lifetimes,” the VP of global marketing wrote, later adding that the chief marketing officer was “anxious to move our business out of being a scam and more into a valued service.”

SCMagazine.com reached out to Jamster about the FTC settlement and case, but did not immediately hear back from the company.

As part of the agreement with the FTC, Jamster is required to automatically refund consumers billed between Dec. 8, 2011 and Tuesday for the shady dealings.

Mobile users who were charged between Aug. 1, 2011 and Dec. 7, 2011 via short code '75555' will be notified by Jamster that they are due a refund and can claim the reimbursement by contacting the company.

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